Technology shares on Wall Street fell sharply on Thursday, November 5, as investors questioned whether companies can earn enough from artificial intelligence to justify what they are spending on it. The Nasdaq Composite closed 5.5% lower and the Nasdaq-100 fell 6.4%. The S&P 500 dropped 4.4% and the Dow Jones Industrial Average fell 3.4%. The Nasdaq Composite closed at about 24,315, the S&P 500 at 7,353.73 and the Dow at 51.523.06.
About $2.5 trillion was wiped from the market value of large Nasdaq companies. That is a fall in share prices, not cash leaving banks. The figure covers the large companies in the Nasdaq-100, so it is not the exact loss across every Nasdaq-listed firm.
Chip stocks fell the most. The Philadelphia Semiconductor Index dropped about 12%. Nvidia fell 9.3%, AMD 17.3%, Micron 17.5%, SanDisk 22% and Qualcomm 9.5%. CoreWeave and Nebius, which provide computing infrastructure, fell about 10% and 15%. Qualcomm also reported weaker-than-expected fourth-quarter smartphone chip sales, so its fall had a company-specific cause.
The Nasdaq was already weak. Its record close was about 27,599.89 on October 6, and the November 5 close was about 11.9% below that. That puts it in correction territory, usually defined as a fall of at least 10% from a recent peak.
The sell-off followed the US midterm elections on November 3. Voters in 10 states decided 41 local ballot measures on data centres: 28 proposed restrictions such as bans and moratoriums, and 13 proposed easing development. At least 14 restrictions or bans passed in Ohio alone. Democratic wins in Texas and Georgia strengthened candidates who campaigned partly on limiting data-centre development.
Analysts have estimated what this could mean. UBS says about 30% of expected US data-centre capacity additions in 2028 could be at risk from construction pauses. Goldman Sachs says states where development could face restrictions account for about 45% of planned US capacity.
Borrowing costs are also a worry. CoreWeave’s five-year credit-default-swap spreads hit a record. These are contracts that insure against a borrower failing to pay its debts, and a higher spread generally means investors see more credit risk. A July analysis estimated that the five largest cloud companies could spend more on capital expenditure than they earn in free cash flow by 2027. It projected annual operating cash flow rising by about $340 billion between 2025 and 2027, while capital spending rises by about $534 billion.
Markets in Asia fell on November 6 because many of the companies that supply chips and memory for AI are based there. Japan’s Nikkei 225 fell about 6.1% and South Korea’s Kospi about 6.3%. Hong Kong, Shanghai and Australian markets also fell. During the day the Kospi dropped as much as 8.8%, which triggered a 20-minute trading halt, and Taiwan’s Taiex fell more than 8% before recovering part of its losses. Investors moved towards safer government bonds.
There are wider concerns about slower growth alongside persistent inflation. US one-year consumer inflation expectations reached 4.7% in October in a University of Michigan survey, which measures what consumers expect and not actual inflation. Oil fell about 15% over the week to just below $100 a barrel but is still about 64% higher for the year. French and Italian government bond yields have risen by more than 100 basis points.
